Recently, many people have asked me how to leverage small amounts of capital for big gains. I have a friend who entered with $2,000 and, in just three months, turned it into $38,000. This isn’t due to luck or some secret trick, but follows a simple, almost naive, iron law—first figure out the maximum possible loss before considering how much you can earn.

Many retail investors lose money because they jump into the market without first deciding how they might lose. The words “stop loss” and “take profit” sound simple, but they are the critical dividing lines that determine whether you end up making money or losing it in the end.

Here are a few practical strategies I’ve tested myself; you can adapt your thinking to use them.

**How to Play Short-Term Contracts**

Use 5x leverage for short-term trading, setting a target profit of 6% to 8%. Your stop loss should never exceed 3%. With a small capital and high leverage, a 1% loss could lead to liquidation. When I trade ETH short-term, with $10,000 as capital, I cut my position immediately if I lose 3%, and I take profits when I gain 6% to 8%. Don’t think the profit is too thin—over two weeks, you can still earn an extra $5,000. Short-term trading isn’t about getting rich overnight; it’s about accumulating small wins steadily and consistently moving forward.

**Mid-Term Spot Trading Strategy**

If you want to catch a big move of 40%, don’t be scared off by intermediate 5% fluctuations. Set your stop loss at key levels—such as previous lows or the 4-hour moving average—and only exit if these are broken.

Take profits in two steps: when the price rises by 35%, sell half to lock in profits; for the remaining half, set a trailing stop—if the price retraces 8%, close all positions. No one can sell at the absolute top, but selling at a relatively high point already puts you ahead of over 90% of traders.

**Position Sizing Is Critical**

With a small position, an 8% stop loss allows you to sleep well at night; with a large position, even a 2% stop loss can make you break out in cold sweat. For example, with $12,000, splitting into $3,000 trades versus holding a full $9,000 position exposes you to completely different risk levels. Remember: risking a large position without a stop loss is like removing the brakes at high speed—accidents are just a matter of time.

My core logic is this: stop loss is a life-saving tool, not a cost; take profit is a reward given by the market, not a target. Before placing an order, treat it as your last trade—first think about how to protect your principal, then consider how to make money. Markets are always changing, but if your capital is gone, no matter how bullish the market, it’s irrelevant to you.

Do you prefer trading contracts or spot? Share your usual approach, and I can help you turn this logic of take profit and stop loss into a practical, directly usable system.